Everyone is forced to pay taxes, pretty much as long as they work or earn a living. So it’s basic math that one of the best ways to save money is simply to lower your tax burden. That’s it. No big mystery. If you have to pay $2,000 in taxes every year, and you could do something to only have to pay $1,000 in taxes every year, then over 20 years you’d have an extra $20,000.
The problem for most people is they genuinely have no idea how to pay less in taxes. Learn the code? Hire an expensive accountant? There’s too may rules and laws and most of us just don’t want to be bothered or risk having the IRS hassle us. “Just take what you want,” we tell the government. “Just leave me along to live my life and don’t arrest me.”
But there is a VERY simple way to pay less in taxes, deal with less government paperwork and save tens or hundreds of thousands of dollars… Yes HUNDREDS OF THOUSANDS OF DOLLARS…and it’s all completely legal…
That’s it. Just move.
Whether it’s across town or across the country, different cities and states are run and managed differently. By picking up and setting up residence in a different location, you can lower your tax burden substantially.
Nine states have no state income tax. Seven of them, Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have zero state income tax at all. While two, Tennessee and New Hampshire, have no EARNED income tax, (still taxing things like interest and dividends).
A huge part of me can’t understand why anyone would live in a state with an income tax at all. (I say it jokingly because for the last two years I’ve lived in one and I pay income tax each and every paycheck.) And while most people realize there are states that don’t have an income tax, if you’ve spent your whole life in one of the 41 states that do, then that’s all you’ve ever known. They might say, “Sure it would be nice, but the state income tax isn’t THAT big of a deal… Is it?”… Is it?
Recently I came across a great tool that explains it simply and quickly. SaveTaxesByMoving.com is a project of the Laffer Center.
The premise is simple. Enter in where you’d be moving from, where you’d move to, and some basic information like your age, income and number of dependents.
The calculator then tells you how much extra you’d pay in taxes per year and over your lifetime. Or in the case of moving someplace with less of a tax burden, how much less in taxes you’d pay. As an example, I tested out what the ramifications would be if I moved from Nevada, (no state income tax) to California, (a high tax burden.) I entered in some sample figures and…
More than six thousands dollars every single year. That’s what would be taken from me just based on where I lived.
Now this is not a be all and end all. It includes a general overview and everyone’s situation is different. But let that sink in. If I lived in California, in just five year’s time I’d have about $30,000 LESS than if I lived in a state with no income tax. $30,000… What could you do with an extra $30,000? How about another five years and having an extra $60,000?
Another helpful tool the calculator provides is a general idea of how much more money you’d have over your lifetime if you moved. If I invested that money in something with even a decent return, in this case I would have more than 3/4 of a million dollars by age 67.
A helpful chart tracks the lower investments as well. Even at a paltry 2% return rate, saving that money each year would yield me an extra $300,000 by age 67.
Think how amazing that is. Just by living in a different part of the country, heck, maybe even an hour’s drive away from where you live now, you could have hundreds of thousands of dollars over a few decades. HUNDREDS OF THOUSANDS OF DOLLARS.
Check out the website to see how much extra you’d have in your bank account just by living in a different part of the country.
And when it comes to cutting costs, earning more or saving money, consider something as basic as moving. Sure if you’re older, married with kids and have major ties to the community it would take more effort than a young couple or single individual. But think about the longterm implications and the benefits it could have on your life. Plus with nine different states to choose from, there’s almost certainly one or two that you could find appealing.
Spend the time now to develop a business, learn a skill, or investigate a work situation, that will allow you to have a say in where you live. You’ll find that by creating this location freedom, you’ll be providing substantial money saving and investment benefits for yourself and your family.